What Retailers Look for From Startups

10 May What Retailers Look for From Startups

What does innovation mean to retailers today? What categories of products, technologies and customer segments are retailers looking for? What stage of startup and how will retailers work with?

We attended one of the Retail x Series in NYC, the occasion to share and get the insights from Sarika Doshi, VP Strategic Partnerships and Business Development at Walmart eCommerce, Scott Lux, VP Ecommerce & Performance Marketing at INTERMIX (acquired by Gap) and Rima Reddy, Director of Corporate Partnerships at XRC Labs & formerly Digital Strategy & Business Development at Ralph Lauren.

If you are a startup and aim to meet key retailers and close a deal, you may find a few tips below.

What does innovation mean to Retailers?

For most retailers, innovation refers to new ways to improve customer experience and serve end-to-end customer needs in order to keep relevance and competitiveness. As a consequence, innovation often aims differenciation as a brand.

Because being agile is easier within smaller organizations, many Retailers rely today on startups to keep and drive the lead on innovation and trends; and quickly – at least faster than they would do in-house – bridge the gap between where they are lying today and where they want to be. Thus execution speed matters, a lot. Especially in Retail, which has a short-term and day-to-day mindset. And Retailers expect ROI of each innovation-related project to be positive on the first year.

As the omnichannel customer value exceeds the single channel customer value, there is a need for tools which enable Retailers to streamline processes while ensuring easy integrations (Demandware integrations are often a nightmare and Retailers are fed up with the common startuper over-promise ‘This is only one line of Javascript’).

Retailers and brands look for validation and influence to reach and convert more. They welcome all the solutions oriented towards new services providing reassurance to their audience. As an example, Walmart / Jet.com valued Latch – a smartlock system – as a good fit in their run for the last mile delivery.

Is there a minimum threshold to get the interest of a Retailer?

Most of American Retailers agree with the fact they would consider a collaboration with startups that went through a post-seed funding – at least a Series A – because of the need for scale and sophistication required by their business.

Besides, a lack of cashflow and of transparency are absolutely deal-breaking factors. Indeed, Retailers face an obligation of due diligence as per shareholders expectations.

What if you have not raised enough capital? Is there a chance to work with a leading Retailer anyway?

The answer is: less likely, but yes. Prior to a series A you may be granted a deal to work on a short-term (1 to 3-month) pilot project. But let’s admit it is rare.

There is also an exception for projects that do not need to be at scale or require tricky and expensive integrations, in the field of Public Relations & Social / Influential Marketing for instance. There Retailers aversion for risk suddenly decreases.

Who should startups address: Innovation or Business divisions?

The answer depends on several variables:

You should align the targeted interlocutor with the product or challenge you plan to solve within the organization

You should target the interlocutor whose job will be made (MUCH) easier thanks to your solution

Never lose sight of who controls the P&L and the budget.

Nowadays Retailers receive so many requests that, although you address the right person at the right time with the right message, there is a risk you would not hear back from the recipient however. The advise of Retailers: leverage networks and opt for introductions and referrals as Managers would be much more likely to answer a request and initiate a call with a startup they heard from another colleague who values their time and share common goals while contributing to the growth of the business rather than from cold calling.

What kind of trust factors Retailers look for from startups?

Inspiring detailed use cases that drive confidence and prove the ability of the startup to execute AT SCALE.

Funding and resources

Track record, especially credentials among other Retailers or FMCGs. The complexity of business and systems (e.g. Demandware, again !) requires sophistication and experience.

People who really understand their business and challenges

What a first great meeting looks like

The solution will be assessed by the Retailer depending on how it makes its life easier and business better. They care less for the story and recommand to keep it for investors. They will also assess whether it provides quick ROI benefits and if the relationship with the startup will be transparent and discreet (Startups should always respect NDAs, even the ones signed with the competitors of the Retailer they target to initiate trustworthy relationships).

Retailers also value honesty, especially when it comes to implementation time and know-how. And expect startups to not underestimate how integrations could be painful and tricky. Again, should you have ever faced Demandware, this is not only one small script that will be implied and required.

Startups should also show empathy on challenges faced by Retailers and focus their speech and use cases in a way they could prove they understood the challenge and are able to solve it at scale…. Personalization is everywhere 😉

Then, what comes next?

A NDA and a discussion to explore further collaboration options

The Retailer will check if the solution fits in its 12-month roadmap (and budget)

The Retailer will estimate both external and internal costs related to the project and evaluate if it fits in its budget.

Retailers love startups which are realistic and explain how it will work.

The Retailer will evaluate the vendor capacity: did they already integrate with Demandware, Salesforce, etc… Do they know the players of the industry they would have to compose with?

What time does it take from the pitch to a first pilot implementation or contract?

Many projects show up during It really depends on the roadmap: the more urgent the need, the faster the deal will be closed and the implementation will happen. For international companies whose headquarters are located out of the United States, it may require more time because of longer validation processes and cycles. Two other factors will impact the speed of implementation: is the integration low- or heavy-tech on one hand, and how large is the deal on the other hand. The heavier the integration and the larger the deal, the longer it might last.

The science – and sometimes the magic – of planning management refers to the ability to find the proper timeline and balance to combine the following imponderables: 12/24-month budgets, most likely 9-month implementation and the immediate customer need. How to jump in faster while even the technology itself changes during this laps of time is key to succeed.

How to contact again a Retailer after a first meeting?

The meeting went well but you never heard back from the Retailer. It happens, maybe one of the components described above was a mismatch (roadmap, budget…). Persistance is appreciated when brightened up with substance: Sharing a valuable news or update could be rewarded (« I know you’re busy, I wanted to share … we’ve just partnered with… » ; « I read this article and thought we should definitely meet again… »). While persistance without additional valuable content might land in the trash of your interlocutor mailbox.

As a conclusion…

Targeting and addressing the person in charge of the P&L and budget is often key. And they’re often controlled by the Business teams rather than by the Innovation Department. Then, managing good relationships from top to bottom is crucial as the success of a project depends on all the team members and not only on decision-makers. This would help build and inspire confidence in a context where Retailers have to find the correct balance between control – to meet the goals of their operational plan – and trust – to empower the startup and let it free to do what it is expert at, does best and excels in.

Last but not least, and we hear this word a lot those days, transparency is not a commodity while working with a Retailer. Should you work with a competitor (and are not obligated by a NDA), let the Retailer know. Thus he would evaluate the risk of an overlap while building a long-term competitive advantage. Remember that Retailers talk to each other and do not like ‘bad surpises’, do not lie. It will come into the contractual phase anyway, so be transparent from the very beginning of the relationship.

At B.D.C. we have been working closely with Retailers and Startups in their digital transformation and international development for years. Our team of consultants loves Retail Tech and believes players of the Retail industry have to AI-dapt or die in a context of Digital acceleration which reshapes the Industry landscape.